CIBC FX Flows: FXWW

From the FXWW Chatroom: Market was caught up with headlines coming from Fed Res Governors, we had Powell, Kashkari and then Dudley. First off, Fed Powell said Fed expects interest rate to rise somewhat further. He also said uncertainty requires policy to be flexible and Fed must act decisively if the economy faces new threats. Then dovish Kashkari said there is no reason to raise rates when inflation continues to run low. Opposing comments from Dudley, that he is not particularly concerned that inflation is little below Fed target.

UsdJpy was trading 111.09 at the New York close then jumped to 111.34 on Powell’s initial headline on raising interest rates. UsdJpy fell back to 111.10 when market digested the other headlines. We slipped back onto 110-handle on Kashkari. Bids are mentioned 110.60-70, while Ichimoku Cloud baseline at 110.71. Plenty of 111.00 option strikes will mature this week, totalling close to $2.9bn. Into the late Tokyo morning, UsdJpy felt the squeeze up to 111.32. Chatter of sell orders lurk in the 111.70’s.

NzdUsd firmed towards 0.6929 with move linked to AudNzd breaking 1.1000. There was a report in Stuff News that Finance Minister Grant Robertson said it makes sense to remove LVRs but respected the independence of the Reserve Bank. This NzdUsd could extend to 0.7000, stop buy orders from systematic funds thereafter.

AudUsd slipped into 10-pint range – capped by AudNzd interest.
UsdCad drifted away from Toronto close 1.2769 with little interest. BoC will be publishing the bi-annual Financial System Review today. Our macro strategist Bipan Rai said this is important and we’re watching to see if the assessment of an ‘externally generated recession’ (re NAFTA termination) has gone to a higher risk level than it was in June. Markets tend to ignore the FSR, but it’s been a great lead signal for BoC communication in the past.

Asians
Onshore spot USDCNY opened higher, taking the USDCNH along as well. Market players said onshore Usd buying is purely corporate demand for month-end and that is putting squeeze on the USDCNH short positions.
Interesting article in FT on South Africa – how Moody’s decision to review for possible downgrade has South Africa dodging the bullet. Investors see Moody’s decision as buying opportunity but this action is a cloud of uncertainty. The weak Usd has helped the Zar but should US monetary policy turns hawkish, South Africa will be among the EM at greatest risk.